The CFO's Role as Chief Revenue Officer Webinar

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Chief Revenue Officer WebinarAlmost every company is looking for top-line revenue growth, yet typical approaches to sales and marketing have significantly lost effectiveness in a forever altered business environment. Achieving growth in the new normal requires the same systematic and disciplined approach businesses have been applying to other parts of their organizations for years, and CFO's are in a unique position to lead this effort. In this Chief Revenue Officer Webinar we discuss new approaches to revenue production, and highlight success stories that have helped generate average sales improvement of over 30% per year.

This video is from the Proformative webinar "The CFO's Role as Chief Revenue Officer" held on December 18, 2012. The webinar features presentations from Bruce Bendix, Director, Baker Tilly Virchow Krause, LLP and Craig McKell, Leader, Revenue Performance Management Group.

 

Chief Revenue Officer Webinar

 

We have a number of learning objectives today. Primarily, we want the audience to understand why revenue is at risk for many companies, and how the office of the CFO can help. There's actually an awful lot that the office of the CFO can do here.

We hope to help you all gain insight into the new buying process and misalignment with most sales and marketing practices. Understand why revenue performance is a process of measurement issue, which happens to be our specialty within the office of the CFO. See how the office of the CFO is able to help their broader organizations come to grips with revenue issues and help them really set up people, process, and technology to perform well and succeed.

It's a pleasure to be here today for this Chief Revenue Officer Webinar. To start out, perhaps many of you have read the book or seen the movie "Moneyball." For those that don't know, it's of course the story about how Billy Beane was able to create a winning baseball team, despite lacking the big payrolls of the big market teams. In this case, necessity forced Billy Beane to either adapt or die.

He looks at a game that has been managed and played in exactly the same way since 1876. He looked at it in a way which nobody before him had dared to look at. He employed a concept called saber metrics. In so doing, he discovered new value in simple, unspectacular, unexpected places. Like major league baseball, the game of making revenue has for the most part been managed and played in pretty much the same way for as long as anyone can remember.

It's also for the most part been based on historical measures that were never questioned, and which failed to capture what was truly adding value. When we ask chief sales officers and sales leaders how they measure sales performance, more than half still tell us that they don't measure it at all. Of the remainder, most depend solely on a single trailing indicator, performance against quota. Those that rely on anything further talk about the size or trend of their pipeline, or perhaps the number of proposals that result in a win.

Based upon our knowledge and experience working with these dysfunctional sales organizations, these metrics are subject to wild fluctuations, even within the same  company. In short, save for a few isolate exceptions, nobody really understands very much about the value of the revenue process or what's gone missing. They continue to flounder. Like major league scouts used to do, organizations continue to spend big dollars on sales people without really truly understanding the process involved or how much value these people really add, if any. Then, they just sit there, waiting for them to hit home runs.

Just as Billy Beane showed that sustainable success in baseball is about buying wins rather than players, and by getting those players from one base to the next, sustainable success in revenue comes from repeatedly and consistently executing a series of interconnected actions that can be broken down, managed, and measured in a logical sequence. Just like going from first, then to second, and third, and finally home.

What we found is that there's a whole lot of value in the revenue creation process that currently isn't understood. As a result, most organizations' sales results look like the Oakland Athletics baseball team before Billy Beane came in and showed them really how to turn an unfair game on its head to their advantage.

Why is this game of revenue so important now? Why are you, as CFOs, increasingly concerned? Well, first, many of you expect the strong head winds to continue. Many of you are doubtful that the U.S. will experience any meaningful recovery next year. There's plenty of blame to go around - the fiscal cliff, political gridlock, lingering effects from de-leveraging brought by the global financial crisis, and a long-term decline in U.S. combativeness. Consequently, many of you are becoming more pessimistic about your financial prospects. That hasn't changed the expectations of your shareholders and boards that expect growth.

Why is this topic relevant to you, the CFO? Shouldn't this be a discussion for the chief sales and marketing officers? Well, we'll show you the topic is relevant to you for two reasons. First of all, the role of the CFO has changed. As the above chart shows, CFOs have advanced to a strategic position in most companies. They have moved beyond just finance to be strategic advisors to the business. At least 50% of you are involved in revenue planning, and almost 25% in creating the revenue plan.

Editor's Note; You may also want to take a look at some of Proformative's many other recorded webinars, such Leasing & Revenue Recognition Webinar, Corporate Finance Technology Strategy Webinar, Time & Expense Accounting Webinar, Revenue Recognition Regulations Webinar and Corporate Budgeting & Forecasting Webinar.

An even greater number are responsible for the key performance indicators of the business, which is really what revenue performance management is all about. The second reason is, as we'll point out, the strengths of the CFO function are exactly the skills needed now in sales and marketing. CFOs have been the owners of budgeting and forecasting, but now need to extend their reach to the sales and marketing to really understand the drive of their revenue. Sales and marketing meets the discipline of process and measurement, which is the strength of most finance functions.

Craig: If anyone doubts that the game of creating revenue isn't about process and measurement, just consider this conversation that we've been having with management teams down here in Australia and also in the United States and Europe over the last eight or nine years. You want to follow on the slide. I'm going to start at the bottom of the conversation and work up, and invite you to apply your own numbers if you like, or if you can.

The first question we ask is, "What's your organization's new revenue target next year?" The answer in this example, and this actually does come from a real life case study, is $10 million. Now, question two, then, "What's your organization's average sale or contract value?" In this case, the answer is $100,000. Okay, so therefore, to get your $10 million, you need to close 100 new deals.

Question three, "What's your organization's proposal to close ratio?" It could be offer to close. Don't get hung up on the terminology. It can be a proposal or quote or whatever that final offer to the customer looks like, the final offer that they can either accept or reject. What's that number for your organization? The answer usually is, "We don't know," but across our sample data last year was just less than one in five. We used 20% for the illustration. At 20%, your sales team needs to submit 500 proposals or quotes or whatever, to get 100 over the line, if they're operating at the benchmark.

Question four then, before you can make any customer an offer, you have to meet them. Sometimes it's physically, sometimes by phone or even online, but there has to be a first meaningful point of sales contact. We call it a meeting. "What's your meeting to proposal ratio?" The answer again usually is, "We don't know, because we don't measure that." Our research shows it to be about one in three, on average. We use 33% for the illustration. At 33%, your sales team needs to go to 1,500 first meetings or appointments, in order to generate those 500 proposals.

Question five, before sales can secure a meeting or appointment, there must be leads for them to work on. "At what rate is your organization currently converting leads into meetings?" Again, the answer is usually, "We've got no idea." Our research shows it to be about one in three again. We'll go with 33%, which means 4,500 leads are required. For that $10 million to have any degree of rigor or reliability, the pipeline or funnel needs to have 500 plus 1,500 plus 4,500 equals 6,500 actions in it. Touching four
and a half . . .

End partial; Chief Revenue Officer Webinar

 

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